Satellite piracy costing TV industry billions // 2009-03-15
But even the threat of legal action doesn't scare off thieves
March 15, 2009
Tony Wong
BUSINESS REPORTER
The modern day pirate doesn't sport a patch or walk with a limp.
His weapon of choice is an unassuming pizza-sized satellite dish that can literally harpoon signals from space - and provide lucrative and illicit profit.
And it's happening across the country. The Canadian Motion Pictures Distribution Association estimates that the total loss to the industry from satellite piracy in 2001 alone was about $1 billion - and that number is likely far higher today.
If pay television is to ever have a viable future, providers have to figure out a way to make sure they get paid.
But lately, satellite companies, including Bell ExpressVu and U.S. based DISH Network have been fighting back. The companies are switching to a tough new encryption system while using the threat of court action to target end users.
"We take this very seriously and we have taken a number of actions to counter signal theft," Bell spokesperson Julie Smithers said. "We are taking all appropriate steps to prosecute criminals."
Satellite companies like to remind users that theft of signal not only means less subscription revenue for providers but also a fall in ratings for stations, which translates into lost advertising revenue, and for artists who are given a portion of profits from subscriptions through the Canadian Television Fund.
Los Angeles-based media analysts The Carmel Group estimates there are at least two million illegal satellite television households in the U.S. and Canada, out of a universe of about 15 million legal households. And the number is growing exponentially.
"This could cripple the industry," said Carmel chair and analyst Jimmy Schaeffler. "This is the equivalent of someone driving up to a gas station, filling up their tank and driving away, and then doing it every month."
In the digital age, pirates are likely to look a lot like James, a middle-aged Toronto engineer with two children who happens to enjoy watching the Tennis Channel, which is not available on Canadian television.
"I can't believe I was actually paying for cable before," he enthuses. James has access to a universe of more than 200 channels on Dish Network, including current pay-per-view movies that are only available at the video store for a cost. Last summer he put up a second satellite at his cottage, with a dish and receiver from a computer store in downtown Toronto, that he purchased for less than $200.
James is currently watching a live tennis match in his living room, which is decorated with trophies from his local club. Flipping through channels on a black set-top box reveals that he has fully unscrambled access to dozens of Hollywood movies (currently playing is The Dark Knight and Milk) for which legitimate subscribers have to pay up to $5.99 each.
At the heart of the problem are "Free to Air" satellite receivers that are widely available throughout Canada. While the possession of the equipment is not a crime, modifying it to access subscription signals is.
Free to Air is a system widely available in Europe, where television and radio broadcasts are typically sent unencrypted. There are some 250 Free to Air channels in North America, typically for ethnic programming.
"The way piracy works in North America is when consumers turn their Free to Air receivers into Free to Air units that steal," says the Carmel Group report.
A USB port on the system allows consumers to change the internal programming of the module after downloading software from the Internet.
"What the manufacturers and retailers are doing may not be illegal, but it is wilful blindness," argues Luc Perrault, co-chair of the Coalition Against Satellite Signal Theft and a vice-president of the Weather Network. "These things are being imported by the container load in Canada and it's a serious issue."
The coalition, which represents Canadian cable and satellite providers, is lobbying government to toughen laws against piracy, including harsher sentences for pirates.
There have been some charges, but they aren't coming quickly enough for the industry. In 2007, Durham Regional Police charged three Whitby men with theft of telecommunications.
In what police say was the first bust of its kind in the province, authorities seized $20,000 in satellite receivers, dishes and computers. Web sites connected with the businesses were also shut down.
"This is theft - a criminal offence - no different than stealing goods from a retail store," said police.
Persons convicted of modifying, selling or distributing equipment for piracy are subject to fines of $5,000 per count and the possibility of imprisonment. But satellite providers say the penalties aren't tough enough.
The federal government recently announced new copyright legislation aimed at the downloading and copying of intellectual property such as DVDs.
However, theft of signal was not addressed.
"We didn't expect to be included, but it would have been nice," said Pierre Pontbriand, vice-president of the Canadian Association of Broadcasters, a coalition member.
Pontbriand says he would like to see more action against dealers who sell modified equipment.
CASS is also looking at ways to target websites that provide software that allows for illegal access to satellites.
In the United States, satellite providers are closely watching a lawsuit launched by EchoStar Communications against a California set-top distributor. EchoStar claims Oceanside, Calif.-based Viewtech has modified receivers to receive illegal programming. Viewtech has said the claims are "baseless."
So far, similar actions haven't happened in Canada, but the alliance against software theft thinks they have a simpler solution: They want authorities to outlaw FTA receivers that have USB access ports that allow them to download those signals.
"If you are simply using this to receive free channels over the air, why would you need to modify your receiver?" asks Perrault.
Schaeffler of the Carmel Group says doing that would be a "Brilliant idea. It would stop the problem outright."
The move would be controversial and would meet with opposition from manufacturers and retailers who stand to lose millions.
Don McEwen, North American sales manager for Mississauga based Fortec Star, which is named in the Carmel paper as one of the three largest distributors in North America, says USB ports are needed to modify equipment for different world markets. Making only one type of receiver for the North American market wouldn't be economically viable, he says.
"I think the solution they're proposing is to beat up on the little guys, rather than addressing the real problem, which is to spend the money to fix their system to protect it against hackers in the first place," says McEwen.
While other manufacturers target the black market, McEwen says his company has held meetings with satellite providers to see how they can work together. He says the vast majority of his clients use the equipment for legitimate programming.
"They have valid points about signal theft, but it's not the responsibility of the people who make the Free to Air boxes, it's the responsibility of the people who want their service protected to fix it."
Chris Frank, vice-president of programming for Bell ExpressVu says the company has "done everything to ensure the integrity of our platform. Secret services around the world spend billions of dollars upgrading encryption systems to make sure their data is secure," he told the Star's Chris Sorensen last year. "We are a commercial company, we can't spend billions, but we spend what it takes within reasonable bounds."
Frank would not say how many people steal from Bell; only that it was "speculative to try and figure it out. But the illegal reception is well within industry bounds."
So far, Bell's electronic countermeasures with a new ecryption route introduced last November, seem to be working, blocking access to many channels. DISH Network is also in the process of migrating to the new system.
"Dark days are coming and no one knows for how long," says Kenmoresp, a blogger on FTAbins, a website for satellite users. "This more than likely will not be a quick fix."
But hackers have been here before. In 2005 Bell announced they had put into place tough anti-piracy measures that were eventually cracked.
Hacker groups are currently working on the new system, and some feel it is only a matter of time before the code is broken.
Meanwhile, one final route that would have a powerful deterrent effect is to go after consumers who steal signal, and that's already happening.
In a get-tough policy, Bell has targeted end users by threatening legal action against customers who have been sold FTA receivers and were registered members of websites that promoted piracy.
"We are contacting you because the operation or possession of illegal signal theft equipment to access Bell ExpressVu's programming constitutes a violation," says a letter sent to customers of a distributor selling satellite equipment.
From TheStar.com:
The letter states that Bell is willing to drop legal proceedings if the user pays a $1,000 fine and hands over the equipment to Bell.
But the new tactics aren't scaring some pirates.
"They'll have to pry the remote control out of my hands before I give it up," says James.
Piracy equipments are readily available:
EQUIPMENT READILY AVAILABLE IN GTA
Satellite equipment that will decode pay television signals is widely available for sale throughout Toronto.
In addition to dozens of web-based companies that will ship a complete system to your home, there are many bricks and mortar retailers in the Greater Toronto Area that sell the equipment.
On the Kennedy Rd. and Ellesmere Rd. retail strip in Toronto, for example, there are at least a half-dozen retailers selling the devices within blocks of each other.
Some retailers openly advertise on billboards outside their stores that Free to Air receivers are available.
While it is not illegal to sell Free to Air equipment, using that equipment to download pay television signals without a subscription is a crime.
One small store is packed with customers who are looking for everything from stainless steel travel mugs for $2.99 to LCD televisions.
The salesperson says one of their most popular brands is the made-in-China Viewsat on sale at $89. A dish will cost an additional $27.
For less than $200 you can purchase equipment capable of receiving hundreds of channels, including pay-per-view, worth thousands of dollars. For a few hundred dollars more, you can upgrade to an HD-capable receiver.
When asked by a reporter whether the system will decode channels from Bell ExpressVu, the salesperson is careful to say he is "only responsible for selling the equipment."
The salesperson suggests the potential customer, after buying the equipment, do a search on the Internet to find an installer.
In another nearby store, which sells a jumble of assorted computer peripherals, the same system is on a shelf for $119.
When asked whether Bell ExpressVu can be downloaded, the salesperson says, "I'd rather not talk about that. But that's why people buy them in the first place."
The salesperson says he can provide the phone number of a installer who will do an in-home set up for $70.
Once the system is in place, the consumer needs to have a computer and Internet access at home, where he or she can access dozens of websites to download encryption codes that will allow free satellite service. The codes to fix the system are usually up within 24 to 48 hours.
Dang why didn't somebody tell me you could do all that ???
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